OVERVIEW:
Headquartered in Singapore, the counter is an integrated engineering group providing solutions and services in aerospace, electronics, land systems and marine sectors. It has over 100 subsidiaries and associated companies in 46 cities across 24 countries. Temasek Holding is its major shareholder with 51% of shares. It is ranked among the largest listed entity in local market.
HIGHLIGHTS:
[1] On 1H2015, the counter achieved revenue at $3.06b which was comparable to 1H2014. Net profit dropped 6% year on year. Marine segment registered huge drop in revenue at 20% year on year, due to lower shipbuilding revenue from local and US operation. The rest of segments is comparable year on year.
[2] The order book stood at $12.4b by 1H2015. $2.3b of orders is expected to deliver in the remaining of months of 2015. New contracts worth at $1.34b were secured on latest quarter from aerospace and electronics segments.
[3] The management is expecting higher revenue and profit on 2H2015. For full year 2015, it shall be comparable to full year 2014.
INVESTMENT THEMES:
[1] The counter has its ~22% of sales in US. Its revenue is priced in USD, but most of the cost like labor costs are charged in SGD. In the medium term, this should translate into higher profit due to strengthening of USD against SGD.
[2] Defence related work accounts for 33% of total revenue, with majority from Singapore government. FY2015 defence budget is projected to rise 4.4% year on year, which in turn should benefit the counter.
[3] The following chart is showing historical 10 years P/E range of the counter. It is now trading at low end, thus present attractive entry price. Dividend yield is > 5% as of now.
ENTRY PRICE:
From the price chart, the counter has fallen to low range over past 5 years. Immediate support is 2.74, so suggestion is to accumulate now. Investor could target both dividend and price gain in mid to long term.
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